ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy. Since the demand for goods hasn’t changed, the price increases from production are passed onto consumers creating cost-push inflation.

Detailed explanation-2: -Demand-pull inflation arises when the total demand for goods and services (i.e. ‘aggregate demand’) increases to exceed the supply of goods and services (i.e. ‘aggregate supply’) that can be sustainably produced.

Detailed explanation-3: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.

Detailed explanation-4: -Definition: Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods.

Detailed explanation-5: -A strong economy. Supply shortfalls. A rapid increase in the supply of money. Inflation expectations. Government policy. 21-Jul-2022